IkeGPS forecasts annual losses as it ramps up sales

IkeGPS forecasts annual losses as it ramps up sales of
MapSight, Spike

By Jonathan Underhill

June 23
(BusinessDesk) - IkeGPS Group, which sells portable
measuring devices and software with applications ranging
from the military to architecture and construction, is
forecasting losses through until at least 2016 as it uses
the proceeds of an initial public offering to build a sales
force and further develop its products.

The
Wellington-based company, which counts Jenny Morel's No 8
Ventures and business partner General Electric among its
shareholders, aims to raise $25 million by selling 22.7
million shares at $1.10 apiece. After the sale it will have
about 50 million shares on issue and an indicative market
value of $55 million. Net proceeds will be $23.1 million,
assuming it meets its target.

IkeGPS is forecasting a
three-fold increase in revenue to $6.5 million this
financial year, rising to $14.3 million in 2016, with the
bulk of the growth through its forecast horizon generated by
its GE MapSight product.

At the same time, its net loss is
forecast to widen by 133 percent to $5.3 million in the
current year and widen further to a loss of $5.8 million in
2016, according to the company's prospectus. Expenses triple
this year to $11.5 million and grow further to $19.6 million
in 2016. Gross margin grows to 60 percent this year and 65
percent next year, according to its forecasts. It doesn't
expect to pay dividends.

"Ike is currently a loss-making
business that is not anticipated to make a net profit in the
prospective period as the business invests in growth," the
company said in its prospectus. "Although ike has been
operating since April 2003, it is only recently that ike’s
current business model has been developed and so investors
should treat ike as an early-stage growth company."

IkeGPS
and GE agreed in December that GE would sell ikeGPS's
electricity market asset management product as the
GE-branded MapSight. Its Spike measuring product, which
employs laser, camera and software in a mobile phone, will
be initially targeted at the architecture, engineering and
construction sectors, it said. The company expects to ship
289 MapSight units this year and 626 in 2016, while Spike
units shipped will rise to 2,533 this year and 2,712 next
year.

The products were developed with the US Army Corps
of Engineers, US intelligence agency developer In-Q-Tel and
software providers for electricity utilities, it said. The
market for MapSight in the US could be worth US$700 million
a year, it said.

"Ike’s target markets are large, its
current penetration is low and the business is highly
scalable due to a business model that features high gross
margins and low marginal cost of sales," the company said.

Employee head count will grow to 84 in 2016 from 59 this
year, of which almost two-thirds will be based in New
Zealand and the rest US-based.

Last week, ikeGPS said it
had firm allocations from brokers and institutions for the
entire $25 million it aims to raise next month, while
withdrawing plans to raise a further $6 million for existing
shareholders. The offer is expected to open on July 1 and
close on July 21, ikeGPS said, adding that there would be no
public pool.

No 8 Ventures, which is ultimately owned by
Morel, husband and former central bank governor Alan Bollard
and family interests, currently holds about 28 percent of
the company. Wellington businessman Alex Knowles owns about
12 percent and former Wellington mayor Kerry Prendergast and
husband Rex Nicholls hold 10.5 percent, Companies Office
records show. NYSE-listed General Electric, which has a
trademark license agreement with IkeGPS, owns 5.9
percent.

The company currently has more than 200 electric
utility and engineering customers, it
says.

The Wellington-based BusinessDesk team led by former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

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